It is the season for foot traffic, but states like West Virginia won’t be capitalizing on this summer’s influx of travelers quite like Florida will. With the smallest ratio of small businesses per 100,000 residents in the country, West Virginia may lose out on a serious cash injection from tourism that helps boost the economy.
Researchers at business consulting firm Venture Smarter conducted a study to determine which U.S. states have the highest and lowest number of small businesses. By analyzing data from the Office of Advocacy and the U.S. Census Bureau, they determined which states are home to the most small business operations and identified why that may be.
Among the study’s lowest-ranking states are West Virginia, New Mexico, Indiana and Wisconsin. These contrast with the heavy-hitting states of Florida, Wyoming and Vermont, which boast a high ratio of small businesses.
Commenting on the study, a spokesperson for Venture Smarter said: “Small businesses have a hugely positive impact on the economy, especially for the state they reside in. They are essential for small communities to thrive, providing job opportunities and diversifying and innovating the community. Additionally, they can bring more foot traffic to states by providing new experiences for everyone.”
States With the Fewest Small Businesses
West Virginia is farthest from the top, claiming the title for the state with the fewest small businesses, at a total of 6,288 small businesses per 100,000 people. Across the state, there is a total of 111,614 small businesses versus 112,951 firms.
Following West Virginia is New Mexico, ranking second lowest in the country with 7,662 small businesses per 100,000 residents. Researchers identify New Mexico as an anomaly, given its high number of tourist attractions, that would typically lend themselves naturally to more small businesses, taking advantage of the added foot traffic in the area.
Ranking third, fourth and fifth lowest on the list are Indiana, Wisconsin and Kentucky, with 7,824, 7,845, and 8,071 small businesses per 100,000 residents, respectively.
Also making a notable appearance in the rankings are Alabama in sixth lowest, with 8,220 small businesses, Washington in seventh, with 8,445, Pennsylvania in eighth, with 8,473, Ohio in ninth, at 8,478 and Iowa claiming the tenth spot for states with the fewest small businesses, at 8,549 registered small businesses.
Interpretations of these results may vary based on definition, but according to the U.S. Small Business Association, small businesses are defined by a few key attributes.
Defining Small Business in America
The U.S. Small Business Association’s Office of Advisory defines small businesses as independent businesses with fewer than 500 employees, although size standards vary by industry. These size definitions look at the amount of annual receipts (AKA the total income plus the cost of goods sold) the business has or the number of employees.
Along with meeting the numerical standards, to be classified as a small business, an organization must be independently owned and operated, for-profit, not nationally dominant in its field, and physically located and operating in the U.S. or its territories.
States with the Highest Ratio of Small Businesses
Venture Smarter’s study reveals that Florida has the country’s highest percentage of small businesses per 100,000 residents. Researchers attribute this high ratio to the state’s booming tourism industry, which includes attractions like Walt Disney World and Universal Studios. Florida has 2,974,046 small businesses or 13,370 per 100,000 residents – a massive number when one considers that there are a total of 2,979,054 registered firms in the entire state.
Second to Florida is the state of Wyoming, which hosts 12,398 small businesses per 100,000 residents. Of Wyoming’s 72,901 registered firms, 72,081 are small businesses. Although Wyoming has a significantly smaller population than Florida, the high ratio of small businesses may also be attributed to local tourism hotspots like Yellowstone and Grand Teton Parks.
Rounding out the top five are the states of Vermont, Colorado and New York. Vermont claims third place with 12,191, translating to 79,666 small businesses of the total 78,883 registered companies in the state. Colorado places fourth with 691,230 small businesses out of a total of 694,753. Colorado’s ratio is 11,836 per 100,000 residents. New York is fifth, with 11,525 small businesses per 100,000 residents.
Noteworthy honorable mentions include Montana, with a ratio of 11,504 per 100,000 residents, Maine, with 10,915, California, at 10,870; Georgia, at 10,829; and Texas, with 10,357.
Commenting on the study, a spokesperson for Venture Smarter said: “Across the country, there are a total of 33,187,742 small businesses, with this number expected to rise as more people turn their passions into businesses that can provide more flexibility and satisfaction than other jobs.”
Starting a Small Business in Your Community
Americans interested in being among the 33,187,742 entrepreneurs who have started small businesses in the country are in good company. Based on findings from the study, individuals living in areas with high foot traffic or in states that are economic hubs will find it easier to create a business that continues to thrive for years.
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